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SugarCRM yesterday released a new low-cost, on-demand CRM option for less than $10 per user per month and slashed prices on its other two on-demand offerings, just a day after Microsoft offered new financing options for its CRM and ERP product lines.

It's clear that on-demand -- or Software as a Service (SaaS) -- CRM is seeing increased pressure on pricing in the wake of the worldwide recession. Microsoft itself increased the SaaS CRM pricing pressure when it first released its Dynamics Live CRM applications at promotional prices of $39 per user per month for its Professional Edition and $59 per user per month for its Enterprise Edition.

SugarCRM's new offering is SugarExpress, a step up from its free open source application. It includes SugarCRM's core sales service and marketing features, plug-ins for Microsoft Office and access to SugarCRM support. Additionally, it offers a "Module Builder" to create custom modules and "Cloud Connectors" to integrate with third-party data services like Jigsaw and Hoover's. It sells for an annual subscription of $499 for up to five users, or $799 for up to 10 users. SugarCRM also reduced the price on its Professional Edition from $40 per user per month to $30 and on its Enterprise Edition to $50 per user per month.

SugarCRM also simplified its pricing by offering all customers a subscription model regardless of whether the application is housed on-premise in a company's own data center or by SugarCRM. Customers get access to SugarCRM's OpenCloud and a download key to deploy in-house.

"In a post-crash environment, we said, 'How can we make things easier and simpler?'" Roberts said. "We said, 'Let's merge them into one product.'"

Customers can, for example, do testing and requirements on site and deploy applications on demand or vice versa, Roberts said. Others may use SugarCRM's servers for backup and disaster recovery.

While most companies will be able to strike a deal when purchasing a set of SaaS CRM subscriptions, the new pricing structure should spur interest, and cloud-based deployments are becoming more popular than ever, according to Denis Pombriant, managing principal of Stoughton, Mass.-based Beagle Research.

"If you're a big consumer of on-demand applications, then you're probably going to negotiate a contract with your supplier, and that's going to vary from published list price," he said. "But if you're smaller and the choice is build a data center or pay $50, $60, $70 per month, it's sort of a no-brainer."

Pombriant also welcomed the marriage of open source and cloud computing.

"Having cloud computing penetrate open source is a big deal because it gets everybody involved," he said. "We're in a paradigm shift increasingly away from data center-based applications. We're beginning a transition out of that -- it's too expensive, too labor intensive, too time consuming. What Sugar's doing is pretty smart. They're saying, 'We're leaving the door open. We're providing you with a clear path.'"

Indeed, Roberts acknowledged that many customers still are hesitant about on-demand and may never want to have their data hosted off-site because of regulations or their own concerns about ownership and security. But SugarCRM's evolution has allowed the company to offer both options. There are now 60,000 servers running SugarCRM code, and the company has data centers in Munich, Cupertino and Shanghai.

"As we go into the new year, we have critical mass," Roberts said. "Now we can converge them together. We're doing this mostly because we can."

Meanwhile, Microsoft has taken its own steps to ramp up CRM demand and simplify purchasing. It introduced a new interest-free financing plan that will allow new customers of Dynamics CRM and ERP to pay for their CRM licenses in equal payments over three years.

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